This website uses cookies to ensure you have the best experience. Learn more

History Of Money And Banking Essay

3112 words - 12 pages

In the last few years, there has been a significant debate on what has caused America’s economic woes. However, few people choose to look at what has caused economic downturns in the past. Some believe that it is the government and central banking’s job to steer the economy in the right direction. While others believe that it is not their job, but the free market’s. Perhaps it is something in between as a symbiosis between government and the free market working together to get things done. Many questions should be asked such as: what is the history of money and banking in the United States? What has proven sustainable monetary policy and how all this either helped or harmed by government involvement? These are important questions on the future of the United States. In the words of John Maynard Keynes, “The ideas of economist both when they are right and when they are wrong are more powerful than commonly understood. Indeed the world is ruled by little else.”(Keynes, 2008) p247 The answer to those questions can be answered by research into this subject. As I answer those questions, I will also be able to answer the major question of: What has caused booms and busts in the past and how or can we prevent them?

What is the History of Money and Banking?
Before answering the major question, the history of money and banking must be discussed. It starts with the Colonial era and ends with the closing of World War II. The findings will help one understand the full picture. As F.A. Hayek quipped, “The curious task of economics is to prove to men how little they really know.” (Hayek, Fatal Conceit)
Colonial Era 1607-1762
The Colonial Era was a time of emerging economic development and intrusion by the British Parliament. In 1651, England passed the Navigation Acts. The Navigation Acts were a series of acts that subsidized various commodities and forced the British Colonies to only use and purchase English goods. It was a disastrous policy because it was based on a mercantilist1 ideology. It hurt their economy and caused unrest in the colonies.(Schweikart, 2011) However, the prosperity that American had achieved by the Revolutionary could not have happened was it not for the protection of British military. Monetarily, England would not distribute coniage or allow the colonists to coin their own money. In 1652, there was no king; Oliver Cromwell was the Lord Protectorate. So in 1667, the colonists coined their own money in Massachusetts and called the Pine Tree Shilling since the pine tree was their leading export. They dated it at 1652 when there was no king to authorize it. It is believed they did this until 1674 (Smithsonian Institute, 2013). Thereby, circumventing the “federal government” at that time. There were very few banks during this era of American History. One called the Massachusetts Land Bank, which issued non-redeemable bank notes, based on land, ultimately the bank notes depreciated and then land banking was outlawed in 1741....

Find Another Essay On History of Money and Banking

Lessons Learned in Money and Banking

1514 words - 6 pages thought is that history will show that despite current criticism, the Fed has done more right than wrong and is the greatest safeguard to our banking system and therefore, the greatest protector of our wealth. Works Cited Mishkin, Frederic S. (2010). The Economics of Money, Banking, and Financial Markets. Pearson Education: New York. (pp. 7, 189, 314, 321, 384-385, 386, 423,639) Brigham, E., & Houston, J. (2009). Principles of Finance: FIN320. Mason: Cengage Learning.

Money, the Federal Reserve System, and Banking

722 words - 3 pages Money, the Federal Reserve System, and Banking You have used money to measure the price, the size of business, total output in the economy, and income. Coins and paper money are called currency. People use currency daily. When you go to a movie, you probably buy a ticket with currency. Coins and paper money work well for small purchases and when payment is made directly from one person to another. But, for large purchases or when

Textbook Questions Analyze How the Money Multi-plier Facilitates the Creation of Money by the Banking System

1648 words - 7 pages Running head: TEXTBOOK QUESTIONS 1 TEXTBOOK QUESTIONS PAGE \* MERGEFORMAT 2 Textbook QuestionsnameECO/372: MacroeconomicsdateinstructorTextbook QuestionsChapter 28 of Economics by Colander (2008) is Monetary Policy. Monetary policy is "a policy of influencing the economy through changes in the banking system's reserves that influence the money supply and credit availability in the economy" (Colander, 2008, p. 666). In this paper, I will

Investigating Systematic and Idiosyncratic Risks in Money, Banking and Financial Markets

1219 words - 5 pages Risks, the Effects and Affected Rose Smith Montclair State University April 13, 2014 Author Note This paper was prepared for Economics 301, Section 01, taught by Professor Ramjerdi Risks, the Effects and Affected At some point in our lives, we have all experience some form of risk either a systematic or idiosyncratic risks. According to authors, Stephen G. Cecchetti and Kermit L. Schoenholt’z book, Money, Banking, Financial Markets, “Risk is

U.S. Money and Banking: Key Issue Facing Us in 2014, Regulating our Banks

841 words - 4 pages had become very popular in banking. More often than not the interest rates on these mortgages were adjustable, starting low to appeal to the borrower then eventually jumping up depending on the market rates. As the interest rates rose and the prices of homes went down, many borrowers began to default on their loans and the foreclosure rate skyrocketed which began the crisis. Eventually the Federal Reserve Bank then the government was forced to

Money and banking the effect on the poor

598 words - 2 pages The exploitation of America's poorThe exploitation of the poor and elderly is an age-old social problem that is being taken to disturbing extremes by some of America's biggest conglomerate companies. In the article, "Fringe banks exploit the poor" written by Michael Hudson, Hudson reveals some of the United States larger corporations Ford, ITT Corp, Fleet financial services, Citicorp, And American Express have been the benefactors of aggressive

History of Money

780 words - 3 pages History of Money Let us consider a problem. You catch fish for your food supply, but you're tired of eating it every day. Instead you want to eat some bread. Fortunately, a baker lives next door. Trading the baker some fish for bread is an example of barter, the direct exchange of one good for another. However, barter is difficult when you try to obtain a good from a producer that doesn't want what you have. For example, how do you get

History Of Money

857 words - 3 pages The History of Money At the very beginning of the commercial world, the main form of economic exchange was Barter, Barter is the exchange of resources or services for mutual advantage, and may date back to the beginning of humankind. There are many experts that believe that animals and plant also barter their natural resourcers. barter among humans has been happening long before the use of money. Today individuals, organizations, and governments

Regulation of Banking and Financial Services

1525 words - 6 pages Regulation of Banking and Financial Services The Failure Process Imposed Upon Financial Institutions The concept of systemic risk sprung to the foreground of the public’s consciousness during the financial crisis of 2007-8 as the Too Big To Fail (TBTF) banks were bailed out by the various US Federal Government agencies e.g., US Treasury via the Troubled Asset Relief Program (TARP) and the US Federal Reserve via Quantitative Easing (QE). However

The Advantages of Islamic Finance and Banking

1410 words - 6 pages are operated by Islamic laws (known as Sharia), so Islamic economic principles are considered as primary guidance. Two basic doctrines behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest . Hence unlike conventional commercial banks, Islamic banks do not pay or charge interest on lending or borrowing of money. This is because the Sharia’s strictly prohibits, among

Selection and Recruitment of Chinese Banking institutions

5788 words - 23 pages IntroductionNowadays, banking industry in North American is facing sever competition and slow growth due to deceleration of population growth. China, in contrast, has younger and faster growing population; hence, more and more foreign banks attempt to invest in the Chinese banking industry. However, due to the high barrier of entry imposed by the Chinese government, at the end of 2003, only $500 million US dollars foreign equity had been infused

Similar Essays

Banking, Money And Finance Essay

2244 words - 9 pages responses significantly to changes in interest rate in the short run but not bank loan. For the Variance Decomposition Analysis (VDA) test, showing the fraction of forecast error variance of variable attributed to shocks in other variable, bank loan played a role in triggering the right monetary policy action. In conclusion, a healthy and stable banking system which involve money and lending channel for monetary transmission in economy enable

Money And Banking Essay

2331 words - 10 pages , which is the borrowing of money in order to purchase stocks. The dangers in buying stocks on margin come down to market and time. The stocks that are purchased with borrowed money can decrease in value at any time, and it may take longer than expected for the stock to increase in value. If there is a severe drop in prices or an extended time delay the speculative investor can be left in less than ideal situation by having to pay back the funds that

Banking, Money And Finance Essay

1896 words - 8 pages of Economics and Administration, University of Malaya ‘Banking Sector Stability and Financial Liberalization: Some Evidence From Malaysia’ [ONLINE] available at [Accessed 5 May 2014] 5 Coricelli, F, Égert, B. and MacDonald, R. (2006) The William Davidson Institute, University of Michigan. ‘Monetary Transmission Mechanism in Central & Eastern Europe: Gliding on a Wind of Change’ [ONLINE] available at http

Money, Banking And Global Finance Essay

1140 words - 5 pages difference. Also, the deep recession of the early 1980s reduced revenues, raising the deficit and forcing the Government to spend much more on paying interest for the national debt at a time when interest rates were high. As a result, the national debt grew in size after 1980.The U.S.'s deficit is bad at this point because the U.S. is close to its maximum production capabilities, and deficit money is being wasted. For example two of the largest portions